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A Privilege For Overseas Persons To Own New Zealand Farm Land

01 September 2014

Debate over the rights of non-New Zealanders to purchase New Zealand farm land has been re-ignited recently as a result of a Shanghai Pengxin company’s application to the Overseas Investment Office (OIO) to purchase Lochinver Station, a 13,800 ha station near Taupo. If the applicant is successful, Shanghai Pengxin will expand its already substantial Crafar farm empire.

Much of the debate is not fully informed - OIO criteria for consent to a sale are not widely known. Whereas a New Zealand purchaser can live overseas, have minimal farming experience, have no intention to develop the land or benefit New Zealand and can be a person of dubious character, the same does not apply to an overseas purchaser. In fact, the stated purpose of the Overseas Investment Act 2005 (OIA) is that it is a privilege for an overseas person to own or control New Zealand farm land. In the case of the Shanghai Pengxin company, the OIO must decide whether such a privilege should be granted.

Overseas Investment Act 2005 (OIA)

The OIA is complex. It regulates the sale of business assets as well as sensitive land to overseas investors. An overseas person is someone who is neither a New Zealand citizen, nor ordinarily resident in New Zealand. A company, partnership, joint venture or trust may be regarded under the OIA as an overseas person depending on its ownership and control.

Sensitive land

Transactions involving the sale and leases for more than three years of “sensitive land” must be approved by the OIO. Sensitive land includes farm land that is more than 5 hectares. Numerous other types of land are sensitive under the OIA.

The investor test

Overseas investors must meet an investor test before they can purchase or lease sensitive land. This test requires the investors to:

Have sufficient business experience and acumen,

Make a sufficient financial commitment,

Be of good character, and

Not be ineligible individuals under the Immigration Act 2009.

Under the OIA farm land must be offered for sale on the open market to New Zealanders before a sale to an overseas investor is approved (unless an exemption is applicable).

In addition, the OIO will only grant consent if:

The transaction will, or is likely to, benefit New Zealand, or

The overseas person intends to reside in New Zealand indefinitely.

Where the investor does not intend to reside in New Zealand, the benefit to New Zealand must be over and above what a New Zealand investor would bring. It must be substantial and identifiable and it will be measured against a large number of economic and conservation factors, including creation of jobs, introduction of capital and expertise and protection of the environment.

Our farming future

Despite the significant hurdles which overseas buyers must overcome to buy New Zealand farm land we must decide whether and to what extent we want overseas persons to control the land. We must weigh the benefits of overseas investment (which for an overseas resident investor must be greater than what a New Zealand investor would bring) against our desire to retain economic independence and control. We must consider that, although increased farm prices resulting from overseas investment benefit existing farm owners, it may become too difficult for young farmers to purchase their own farms. That might mean the demise of the traditional family farm, which has undoubtedly been a major contributor to the success of our farming industry and our farming communities. The more informed the debate on these issues, the more likely any changes to the OIA will have the effect that we as a nation desire.

Please email me at barbara.mcdermott@nwm.co.nz with your ideas for future articles. Keep an eye out for next month’s column, where I will discuss another relevant rural legal issue.

Barbara McDermott is a partner of Norris Ward McKinnon, specialising in commercial and rural law. With offices in Hamilton and Huntly, we have friendly, expert legal advisors ready to help you with your business and personal legal matters.